Quick answer
Stock finance is funding a business uses to buy inventory, with the loan repaid as that stock is sold. The lender usually pays the supplier directly and takes security over the goods, registered on the PPSR. It suits wholesalers, importers, retailers and dealers whose cash is tied up in stock between paying the supplier and getting paid by customers.
Key points
- Pays for inventory up front; repaid from the sale of that same stock
- The lender usually holds security over the goods, registered on the PPSR
- Lenders lend against a portion of the stock's cost, not its retail price
- Slow-moving or perishable stock is harder to fund than fast sellers
A homewares wholesaler lands a container from overseas. The supplier wants paying before it ships, the goods take six weeks to arrive, and retailers pay 30 to 60 days after delivery. For three months or more, the wholesaler’s money is sitting in cartons. Stock finance is built for exactly that stretch.
What stock finance actually covers
Stock finance (also called inventory finance) is a loan or facility used to buy goods for resale, repaid as those goods are sold. Rather than handing cash to the business, the lender often pays the supplier directly, then holds security over the stock until the drawing is cleared.
It comes in a few shapes:
| Form | Mechanics | Who tends to use it |
|---|---|---|
| Inventory line | A revolving limit drawn to pay suppliers, repaid from sales | Wholesalers, distributors, retailers |
| Floor plan | Each unit funded separately and repaid when that unit sells | Car, boat, caravan and machinery dealers |
| Trade finance | Pays an overseas or local supplier, with a set period to repay | Importers buying in bulk |
| Seasonal stock loan | A short-term loan sized for a peak buying period | Retailers before Christmas, farm suppliers before planting |
Why lenders treat stock carefully
Stock is a weaker form of security than property or unpaid invoices. A lender has to ask what the goods would fetch if it had to sell them quickly, usually to another trader at a discount. That’s why stock lenders fund a portion of cost price, never the full retail value, and why they care about:
- How fast the stock turns over (stock days)
- Whether it’s branded and easy to resell, or custom, seasonal or perishable
- Where it’s stored, and whether a landlord could claim it
- Whether suppliers have a retention of title claim over unpaid goods
That last point catches people out. Under the Personal Property Securities Act, a supplier holding a properly registered PMSI (purchase money security interest) can jump the queue over goods it sold you, even ahead of a lender that registered first. For inventory, that registration has to happen before the buyer takes possession. A stock lender will search the PPSR and may ask suppliers to confirm what they’re owed before it advances anything.
A worked example
A distributor wants to buy $120k of fast-moving branded stock. The lender agrees to fund part of the cost against a general security agreement and pays the supplier directly. The distributor puts in the balance from its own cash.
The goods arrive and sell over about 75 days. As retailers pay, the distributor repays the drawing. In dollars, the total cost of that drawing (fees plus interest for the days it was outstanding) is what matters when deciding whether the margin on the stock still makes the order worthwhile. A quick check in our margin and markup calculator helps answer that before committing.
If you’re weighing up an order like this, tell us what you need to fund and we’ll look at whether stock finance or a simpler working capital loan fits better.
Not to be confused with residual stock loans
In property development, “stock” means unsold apartments or houses. A residual stock loan refinances completed but unsold dwellings, which is a very different product secured by real property. When the word turns up in a property conversation, assume that’s the meaning.
Related terms
- Working capital cycle: the time from paying for stock to collecting cash from customers
- Trade credit: supplier payment terms that reduce how much stock finance you need
- Security interest: the lender’s legal claim over the goods
Need to fund stock before it sells?
Stock purchases are some of the most common reasons owners get in touch with us, especially ahead of a peak season or a bulk buying opportunity. Describing what you’re buying, how fast it usually moves and what security you could offer is a sixty-second job. Sending it leaves your credit history exactly as it was. Nobody forwards it to a string of financiers: a single specialist picks it up and gives you a call. Careful, honest answers let us put a fitting stock facility in front of you on the first pass.
Frequently asked questions
Is stock finance the same as inventory finance?
Yes, the two names are used for the same thing in Australia. Floor plan finance for vehicle, boat and machinery dealers is a specialised version where each unit is funded and repaid individually.
Do I need property to get stock finance?
Not always. Many stock facilities are secured by the goods themselves plus a general security agreement and a director guarantee. Property security can lift the amount available or help a newer business qualify.
What happens if the stock doesn't sell?
The loan still has to be repaid, usually by an agreed date. Many facilities set a maximum period for each drawing, so slow sellers may need to be paid out from other cash or refinanced.
How much of my stock's value will a lender fund?
It depends on how easily the goods could be resold. Branded, fast-moving products attract a higher share of cost than custom, seasonal or perishable lines. Lenders work from your cost price, not the price you sell at.
Can a supplier's retention of title clause affect stock finance?
Yes. If a supplier has a registered security interest over goods it hasn't been paid for, it may rank ahead of your lender for those goods. Lenders check the PPSR for this before funding.